India’s state-owned oil marketing companies continue to face significant financial pressure as they incur losses of nearly ₹700 on every domestic LPG cylinder sold, according to the government. The disclosure comes despite multiple increases in cooking gas prices over recent months and highlights the growing burden created by surging global energy costs and supply disruptions linked to the ongoing conflict in West Asia.

The government said the LPG under recovery remains substantial even after the latest ₹29 increase in domestic cooking gas prices. Rising international benchmark prices and disruptions to energy supply chains have pushed the actual cost of supplying a household LPG cylinder to more than ₹1,600, far above the regulated retail price paid by consumers.

The announcement underscores the mounting challenge facing policymakers as they attempt to balance consumer affordability with the financial sustainability of oil marketing companies.

Global energy prices and Saudi CP rates drive higher LPG costs

The government’s statement attributed the rising LPG subsidy burden largely to higher international energy prices. The benchmark Saudi Contract Price, commonly known as Saudi CP and used as a key reference for LPG imports, surged nearly 46 per cent from $543 per tonne before the recent disruptions to $775 per tonne in May. The benchmark has reportedly climbed further to around $790 per tonne in June.

As India’s petroleum product pricing remains linked to international benchmarks, the increase has significantly raised procurement costs for oil marketing companies. Officials noted that while global prices have risen sharply, domestic consumers have been shielded from the full impact through regulated pricing mechanisms.

The widening gap between international costs and retail prices has resulted in a sharp increase in the oil marketing companies losses, which continue to absorb a large portion of the financial burden.

Domestic LPG cylinder remains heavily subsidised

Following the latest revision, a standard 14.2-kilogram domestic LPG cylinder in New Delhi costs ₹942, compared with ₹913 previously. However, beneficiaries of the Pradhan Mantri Ujjwala Yojana continue to receive substantial support through direct subsidies.

Under the scheme, eligible households effectively pay ₹642 per cylinder after receiving a subsidy of ₹300 per refill. However, the number of subsidised refills has now been reduced to four annually, compared with nine subsidised refills announced previously.

Government officials emphasized that even after recent increases, Indian households continue to pay significantly less than prevailing international market rates. They noted that the burden of rising energy costs has largely been absorbed by upstream entities and oil retailers rather than being passed directly to consumers.

Strait of Hormuz disruption adds pressure on LPG imports

The latest LPG imports India challenge has been aggravated by disruptions linked to the Strait of Hormuz, one of the world’s most critical energy transit corridors. The government noted that approximately 54 per cent of India’s LPG imports typically move through the strategic waterway.

The conflict in West Asia and continuing disruptions to shipping routes have complicated supply logistics and contributed to rising import costs. Despite these challenges, authorities maintained that there is currently no shortage of petroleum products across the country.

To reduce dependence on imports, domestic refiners have significantly increased production. According to government figures, daily LPG production has risen by more than 60 per cent, increasing from approximately 32,000 tonnes per day to around 52,000 tonnes per day.

Commercial LPG prices continue to reflect global benchmarks

Unlike household cooking gas, commercial LPG prices remain deregulated and are adjusted automatically based on international benchmarks. The price of a 19-kilogram commercial LPG cylinder currently stands at ₹3,113.50 in the national capital.

This translates to approximately ₹164 per kilogram, compared with roughly ₹66 per kilogram paid by domestic consumers after the latest revision. The contrast highlights the extent of government intervention in the household LPG market and the significant support provided to residential consumers.

Commercial LPG prices have already undergone several revisions since the onset of energy supply disruptions, reflecting changes in international market conditions more directly than domestic cylinders.

LPG subsidy burden expected to exceed ₹60,000 crore

The government estimated that the overall LPG subsidy burden and under-recovery for the current financial year could reach approximately ₹60,000 crore, up sharply from ₹41,338 crore recorded during the previous fiscal year.

Officials clarified that this under-recovery figure is separate from direct subsidy payments and represents the difference between international supply costs and regulated domestic selling prices. The sharp increase reflects both higher global benchmark prices and the government’s decision to maintain consumer prices below market-linked levels.

Energy sector analysts suggest that sustained geopolitical tensions and elevated global fuel prices could continue exerting pressure on public finances and oil marketing companies throughout the year. At the same time, they note that shielding consumers from volatile international prices remains a critical policy objective given the importance of LPG as a household cooking fuel.